Update: States That Allow Benefit Corporations

Legislation allowing for the formation of a “benefit corporation” – a for-profit entity that “voluntarily meets higher standards of corporate purpose, accountability, and transparency”[1] – is effective in 20 states, as of this writing. Sixteen more states have legislation pending.

As with all business corporations, a benefit corporation has shareholders to whom it maintains its fiduciary responsibility. Additionally, it: “1) [has] a corporate purpose to create a material positive impact on society and the environment; 2) [is] required to consider the impact of [its] decisions not only on shareholders but also on workers, community, and the environment; and 3) [is] required to make available to the public an annual benefit report that assesses [its] overall social and environmental performance against a third party standard.”[2] The annual report will address how well it has met the third party standards to which it ascribes. Each corporation chooses, up front, which third party’s guidelines best meet its overall purpose. The annual report then becomes the final measure of the corporation’s “benefit” to the common good.

There is a model statute which, beyond requiring the annual report be published for public review, requires the corporation also file it with the state’s corporate administrator. However, approximately half of the states in which legislation is effective have no filing requirement (see below).